#pca arbitration

[wkirtley]

International Arbitration & International Arbitration Attorney Network

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Arctic Sunrise Arbitration (PCA case 2014-02) – Russia to pay €5.4 million in damages

On 10 July 2017, a PCA Arbitral Tribunal seated in The Hague rendered its award on compensation in another politically sensitive arbitration between Russia and the Netherlands (also known as the “Arctic Sunrise Arbitration”). The PCA Tribunal ordered Russia to pay €5.4 million in damages to the Netherlands for the capture and detention of a Greenpeace ship named the Arctic Sunrise.

Factual Background

In September 2013, a group of Greenpeace Activists were using the Dutch vessel to protest against Gazprom offshore drilling platform in the Barent Sea. The main issue was, however, that the Sea lies within Russia’s exclusive economic zone but outside of its territorial waters.

Russia immediately seized the vessel and brought it to the city of Murmansk, which is a large northern port at the end of a deep bay of the Barents Sea. The ship was detained and released only in August 2013, almost one year after the incident.

The crew counted 30 people (also known as the “Arctic 30”) who were arrested and charged with criminal offences, being released on bail only after two months.

Award on the Merits

The five-member Arbitral Tribunal was composed of Thomas Mensah (UK/Ghana) (President); Henry Burmester (Australia); Alfred Soons (the Netherlands); Janusz Symonides (Poland) and Alberto Székely (Mexico). The Tribunal issued an anonymous award on merits almost two years ago, on 14 August 2015. The Tribunal had held Russia liable under the UNCLOS Convention for boarding and seizing the Dutch vessel Arctic Sunrise and arresting around 30 members of its crew. More precisely, the Tribunal ruled that by boarding, investigating, inspecting, arresting, detaining, and seizing a vessel flying the Dutch flag, without the prior consent of the Netherlands, and by arresting, detaining, and initiating judicial proceedings against the thirty persons on board that vessel, Russia was in breach of the UNCLOS Convention. Interestingly, the Tribunal also found that Russia breached the Convention by failing to comply with the order prescribing provisional measures issued by the International Tribunal for the Law of the Sea and by failing to pay the deposits requested by the Tribunal in the proceedings.

Award on Compensation

The Tribunal saved the issue of quantum and damages for a later phase, as is common in PCA arbitrations. In the Award on Compensation from 10 July 2017, the Tribunal ordered Russia to pay five different sums (with interest):

(i) EUR 1,695,126.18 as compensation for damage to the Arctic Sunrise; (ii) EUR 600,000 as compensation for non-material damage to the “Arctic 30” for their wrongful arrest, prosecution, and detention in Russia; (iii) EUR 2,461,935.43 as compensation for material damage resulting from the measures taken by Russia against the “Arctic 30”; (iv) EUR 13,500 as compensation for the costs incurred by the Netherlands for the issuance of a bank guarantee to Russia pursuant to the ITLOS Provisional Measures Order; and (v) EUR 625,000 as reimbursement of Russia’s share of the deposits paid by the Netherlands in the proceedings.

For more information see PCA press release dated 18 July 2017 available here.  Both Awards are available on the PCA website and may be accessed here.

Russia’s Refusal to Take Part in the Proceedings

From the very beginning, Russia refused to take any part in the arbitration proceedings. It claimed that the Tribunal lacked jurisdiction to hear the case. In a press release in 2015, Russian Foreign Ministry spokesperson Maria Zakharova said in commentary:

“The Russian Federation has not participated in that proceeding and it still believes that the formed arbitration tribunal has no jurisdiction in this case…[A]fter a copy of the arbitration judgment is formally received, the Russian side will study it in detail. Yet it is already possible to conclude that this judgment does not fully take into account all the aspects of the incident involving Greenpeace activities, as well as the legal norms and court practice related to this case“.

This award comes on the heels of another politically-sensitive PCA award in the Slovenia v. Croatia border dispute, on which we have previously reported here.

Taking into account that this case involves Russia and claims for damages, the enforcement of the award in the Arctic Sunrise arbitration will not be an easy task for its lawyers.

Nina Jankovic, Aceris Public International Law Arbitration Firm

[wkirtley]

International Arbitration & International Arbitration Attorney Network

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Final Award in PCA Arbitration Between Slovenia and Croatia

The long-awaited Final Award regarding the PCA arbitration between Slovenia and Croatia has finally been issued. It was rendered on 29 June 2017, ruling upon the border dispute between the Republic of Slovenia and the Republic of Croatia.

The Arbitral Tribunal, presided by Judge Gilbert Guillaume, rendered its Final Award on the basis of an Arbitration Agreement between the Republic of Slovenia and the Republic of Croatia, signed on the 4 November 2009.

The unanimous decision of the Arbitral Tribunal determined the disputed land and maritime border between Slovenia and Croatia and provided for Slovenia’s access to international waters by establishing a “Junction Area”. The junction is subject to a particular regime that differs from any of the regimes as defined by UNCLOS.

Brief History of the Slovenia and Croatia Border Dispute

After the breakup of Yugoslavia, Slovenia and Croatia both declared their independence in 1991, but the border between two ex-Yugoslav Republics remained disputed. Slovenia and Croatia both relied on different sources for the definitions of their land border in the disputed territories. For the maritime border, the countries did not have reference points as the maritime borders were not defined by the former Yugoslavia and had had the status of internal waters.[1] The countries had attempted to resolve the dispute since independence, however, their efforts were unsuccessful.

By 2009, the dispute became a significant obstacle to Croatia’s accession negotiations with the European Union. After initiatives and the facilitation of the European Commission, the parties negotiated the arbitration agreement that their respective prime ministers, Pahor and Kosor, signed on 4 November 2009.

Article 3 of the Arbitration Agreement provided that the Arbitral Tribunal shall determine:

“(a) the course of the maritime and land boundary between the Republic of Croatia and the Republic of Slovenia;

(b) Slovenia’s junction to the High Sea;

(c) the regime for the use of the relevant maritime areas. (…)”

Article 4 provided that the tribunal shall apply the rules and principles of international to determine the maritime and land boundary. For the determination of the junction and its regime, the tribunal would apply the rules of international law, equity and the principle of good neighborly relations, in order to achieve a fair and just result by taking into account all relevant circumstances.[2]

Procedural Obstacles in the PCA Arbitration between Slovenia and Croatia

The arbitral proceedings took an unexpected turn in the summer of 2015, when the Serbian and Croatian press revealed that the Slovenia-appointed arbitrator, Dr. Sekolec, had held communications with Slovenia’s agent. After the revelations, Dr. Sekolec resigned as arbitrator and, soon after his resignation, the Croatian-appointed arbitrator also resigned. Croatia notified the Arbitral Tribunal that it considered Slovenia to have violated the arbitration agreement and that it was therefore terminating the arbitration agreement.[3]

The Tribunal, however, found that “with respect to the question of the continuation of the proceedings, the Tribunal affirmed that it had not only the authority but also the duty to settle the land and maritime dispute which was submitted to it.”

The Tribunal was reconstituted with appointments of new members by the President, Judge Guillaume. Croatia did not participate in the proceedings in front of the newly-constituted Arbitral Tribunal, however, and its representatives did not appear at the declaration of the Final Award in The Hague on 29 June 2017.

The Arbitral Tribunal’s Ruling

The border at Piran Bay was not was not formally divided between the two Republics prior to the dissolution of Yugoslavia, and the two countries inherited no legal title from that time. The delimitation of the border in the Piran Bay was therefore made on the basis of the uti possidetis principle, where the Tribunal relied on effectivités – the effective exercise of territorial jurisdiction. The Tribunal took into account factors such as tourism development, concern for the marine ecosystem, research and police activities, the responsiveness of States in the event of accidents and concern regarding pollution.[5]

The most controversial issue in dispute was the delimitation of the maritime border in Piran Bay and establishing Slovenia’s access to international waters.

Both parties’ arguments regarding the division of Piran Bay were based on Article 15 of the United Nations Convention on the Law of the Sea.[6] Croatia advocated for the general rule of the median line to be applied for the border delimitation and Slovenia argued that rather than simply cutting Piran Bay in half, the Arbitral Tribunal should take heed that Slovenia holds a historical title to Piran Bay and that there were a number of geographic factors, as well as the economic and security interests of Slovenia, that should be taken into account as special circumstances that apply to Piran Bay.[7]

In its delimitation of the territorial sea, the tribunal accommodated the fundamental principle of natural prolongation[8] and the effects of an incidental special feature from which an unjustifiable difference of treatment could result. In the Tribunal’s opinion, the equidistant line would cause an exaggerated “boxed-in” effect of Slovenia’s maritime zone and would constitute a special circumstance that should be taken into account.[9]

With respect to the junction of Slovenia to the high seas, the Tribunal established a Junction Area, where “junction” signifies a physical connection between the territorial sea of Slovenia and an area beyond the territorial seas of Croatia and Italy.[10]

The regime of the Junction Area preserves the integrity of Croatia’s territorial sea and Slovenia’s freedoms of communication between its territory and the high seas for the purposes of uninterrupted and uninterruptible access to and from Slovenia, including its territorial sea and its airspace.[11] These freedoms apply to all ships and aircraft, civil and military, of all flags or States of registration, equally and without discrimination on grounds of nationality. Within the Junction Area, Croatia is reserved a right to prescribe and enforce certain laws and regulations for ships and aircraft in accordance with the UNCLOS. The Tribunal ruled that Croatia retains the right to respond to a request for assistance of Croatian authorities and also, exceptionally, that Croatia should retain the right to exercise in the Junction Area powers under the UNCLOS Article 221 in respect of maritime casualties.[12]

Alain Pellet, a distinguished French international arbitration lawyer, acting as lead counsel for Slovenia in front of the PCA, issued a comment that the decision was sufficiently clear in defining the word “junction”. He was specifically working on the maritime border and high seas access portion of argument and found the decision on Piran Bay to be a “pleasant surprise”.[13] However, the Slovenian press is divided as to the question of whether the Junction Area regime provides for an effective access to the high seas.[14] International law professors at Ljubljana’s Faculty of Law, including Dr. Škrk (acting as Slovenia’s Agent in front of the PCA) and Dr. Sancin, rendered a positive opinion on the junction regime, stating that it does establish a territorial and physical access to the high seas.[15]

The Croatian Prime Minister Plenković issued a statement that Croatia does not consider that the Final Award entails any legal consequences for Croatia and that the country does not expect that Slovenia will unilaterally enforce it. Both countries have exchanged diplomatic notes on the subject and the majority of the international community has urged them to respect the decision and enforce it. However, the US Embassies in Slovenia and Croatia, respectively, have stated that US will not take sides with respect to the Final Award. Germany, meanwhile, has taken a firm stance that international court decisions must be respected and will advocate for the enforcement of the Final Award.[16]

The full text of the Final Award and the arbitration agreement upon which it was based may be accessed below.

Alja Romsak, Aceris International Arbitration Law Firm

    [1] Final Award, para. 37., 880.

[2] Arbitration Agreement between the Government of the Republic of Croatia and the Government of the Republic of Slovenia, Annex to the Final Award.

[3] Croatia terminated the agreement on the basis of Article 60 of the Vienna Convention. Tribunal concluded that it “has jurisdiction under the provisions of the Arbitration Agreement and Article 21, paragraph 1 of the PCA Optional Rules, and in conformity with Article 65 of the Vienna Convention, to decide whether Croatia, acting under Article 60 of the Convention ha[d] validly proposed to Slovenia to terminate the Arbitration Agreement and ha[d] validly ceased to apply it.” Final Award, paras. 198, 199.

[4] Uti possidetis principle governs the transformation of administrative borders into international boundaries following the dissolution of a State. Final Award, para. 256.

[5] Final Award, paras. 886-914.

[6] Article 15 of the United Nations Convention on the Law: “Where the coasts of two States are opposite or adjacent to each other, neither of the two States is entitled, failing agreement between them to the contrary, to extend its territorial sea beyond the median line every point of which is equidistant from the nearest points on the baselines from which the breadth of the territorial seas of each of the two States is measured. The above provision does not apply, however, where it is necessary by reason of historic title or other special circumstances to delimit the territorial seas of the two States in a way which is at variance therewith”.

[7] Final Award, paras. 951-953.

[8] A principle providing that the delimitations are to be effected “in such a way as to leave as much as possible to each Party all those parts of the continental shelf that constitute a natural prolongation of its land territory into and under the sea, without encroachment on the natural prolongation of the land territory of the other. Final Award, para. 1008.

[9] Final Award, paras. 1008 -1011

[10] Ibid, para. 1067.

[11] Links: http://www.rtvslo.si/slovenija/kako-je-potekal-arbitrazni-dan-vecji-del-piranskega-zaliva-gre-sloveniji-ki-ima-tudi-dostop-do-odprtega-morja/426305.

[12] Ibid, Paras. 1023-1028.

[13] Link: http://www.rtvslo.si/slovenija/v-spornih-zaselkih-mesani-obcutki-odvetnik-in-agentka-z-odlocitvijo-zadovoljna/426298

[14] Ibid.

[15] http://www.rtvslo.si/slovenija/kako-je-potekal-arbitrazni-dan-vecji-del-piranskega-zaliva-gre-sloveniji-ki-ima-tudi-dostop-do-odprtega-morja/426305, http://www.delo.si/nedelo/vasilka-sancin-ko-bodo-prebrali-bodo-najbrz-spremenili-mnenje.html.

[16] Link: http://www.rtvslo.si/evropska-unija/juncker-ne-zeli-zavzeti-stalisca-do-rezultata-arbitraze-dokler-ne-prebere-sodbe/426411.

[wkirtley]

International Arbitration & International Arbitration Attorney Network

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The PCA Secretary General’s Role as Arbitrator Appointing Authority

The Secretary General of one of the oldest arbitral institutions in the word, the Permanent Court of Arbitration (the “PCA”), has a very important role under the UNCITRAL Rules as an arbitrator appointing authority.

Under both the 1976 and the 2010 UNCITRAL Rules (as revised in 2013), the Secretary General acts as the appointing authority when designated by the arbitration clause or subsequent agreement by the parties. In addition, the UNCITRAL Rules entrust him or her with the role of the designator of the “appointing authority”, the so-called “indirect appointment” method, for ad hoc arbitrations under the UNCITRAL Rules.

Under the 1976 UNCITRAL Arbitration Rules, the PCA Secretary General may be requested to designate an “appointing authority” in following cases: when there is to be a sole arbitrator but the parties could not agree within the prescribed amount of time (Article 6), in cases when there are three arbitrators, but the Respondent does not appoint the arbitrator within the prescribed period of time ( Article 7, (2) and (3) ) or when two arbitrators appointed by the parties cannot agree on the choice of the President (Article 7, (3)). In addition, the Secretary General will also take this role when the appointing authority agreed upon refuses to act or fails to appoint the arbitrator (Article 6(2) and Article 7(2)), a less common situation. Furthermore, pursuant to Article 12 of the UNCITRAL Rules, he is also given certain powers in case of the challenge of an arbitrator.

Essentially the same provisions can be found in the 2010 UNCITRAL Rules, with slight changes in article numbering.

When the Secretary General acts as the appointing authority, he generally follows the list-procedure provided by Article 6(3) 1976 UNCITRAL Rules and Article 8(2) 2010 Rules. However, the choice of arbitrators for the list-procedure or direct appointments is not limited to any list or panel, and he has broad discretion to choose whoever he finds the most appropriate arbitrator for a particular case.

In practice, the PCA’s role as designator of the arbitrator appointing authority has functioned well under the UNCITRAL Rules. The first Request dates from the days of the Iran-US Claims Tribunal, but the number of requests has increased regularly since then. This “indirect” method might not be the most efficient for the parties, but it provides for the most equitable result, taking into account that it would be extremely hard for a small institution to be able to be the arbitrator appointing authority in each and every case referred to them anywhere in the world.

Nina Jankovic, Aceris Law SARL

[wkirtley]

International Arbitration & International Arbitration Attorney Network

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Croatia v Slovenia PCA Arbitration

The highly-politicized and controversial Croatia v Slovenia Maritime delimitations arbitration, a PCA arbitration concerning the countries’ sea and land frontier dispute, will continue after all, ruled the PCA tribunal in a partial award on 30 June 2016.

The proceedings were interrupted in July 2015 when Croatia raised concerns about the impartiality and independence of the Slovenian arbitrator, Jernej Sokolec, invoking “material breach of the Arbitral Agreement” pursuant to Articles 60 and 65 of the Vienna Convention on the Law of Treaties and aiming to terminate the agreement. Slovenia, on the other side, raised its objections to Croatia’s purported unilateral termination and argued that the “Tribunal has to power and the duty to continue the proceedings”. A hearing on these issues was held in March 2016. The PCA Tribunal chaired by Gilbert Guillaume unilaterally decided that Slovenia, in engaging in ex parte contracts with the arbitrator originally appointed, acted in violation of the provisions of the Agreement. Nevertheless, the Tribunal did not think that these violations were of such nature as to affect Tribunal’s ability to render a final award independently and impartially taking into account that the Slovenian arbitrator resigned and there was no doubt expressed from either side concerning the remaining arbitrators.

Croatian reactions to the ruling of the Tribunal were extremely negative, stating that the partial award was “a missed opportunity for arbitral tribunal to restore confidence in the independence and impartiality of its work, as well as confidence in international arbitration”. Croatia refused any further comments and stated it did not consider itself bound by the decision.

Reactions on the Slovenian side were, as would be expected, very positive. The Slovenian Government said that “Slovenia will respect the final decision and expects Croatia to do the same”.

The Partial Award is available below. It remains to be seen how this highly-controversial arbitration, started seven years ago, followed by a number of interruptions and scandals involving arbitrators and politicians, will be resolved. As for now, one thing is certain – these proceedings are not helping to improve relations between the two Balkan States for the time being.

Aurélie Ascoli

Download the PDF file .

[wkirtley]

International Arbitration & International Arbitration Attorney Network

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The International Arbitration Attorney Network Thanks The Queen Of England Concerning Barotseland

The International Arbitration Attorney Network Thanks The Queen Of England Concerning Barotseland

Following the Barotseland National Freedom Alliance‘s appeal to the Queen of England to ask the British Government to intervene on Barotseland’s behalf, in order to determine the legal impact of Zambia’s violation of the Barotseland Agreement 1964 over the past five decades which led to Barotseland finally accepting Zambia’s repudiation of the agreement and the return of Barotseland to the status of an independent State, the members of the International Arbitration Attorney Network would like to thank the Queen of England for her prompt response and her gracious offer to send this matter to Philip Hammond, MP, the Secretary of State for Foreign and Commonwealth Affairs, with whom the BNFA will be entering into contact forthwith.

Barotseland has historically had excellent relations with the Royal Family, and the Queen Mother was in fact the first woman ever to ride in the Royal barge in the 500 years of Barotseland’s existence as a sovereign nation located in southern Africa. Barotseland’s kings have attended every coronation for well over 100 years, and are the only African dignitaries to have played a role in each of these ceremonies since the coronation of King Edward.

Barotseland was the best-educated and wealthiest part of Zambia at independence, but due to a personal vendetta by Kenneth Kaunda, the first President of Zambia, its institutions were destroyed, much of its wealth was expropriated by the Zambian Government, and the Barotseland Agreement 1964, which was designed to ensure Barotseland’s continued autonomy within an independent Zambia, was repudiated by Zambia.

Since 2012, Barotseland has been seeking to resolve the long-running conflict according to international law, and it entered into contact with the International Arbitration Attorney Network to request assistance to have the matter peacefully resolved via PCA international arbitration. Although Zambia has refused to participate, over 10,000 Barotseland representatives have already signed an arbitration clause that would allow this to take place.

Barotseland has also become a member of the UNPO, its case against Zambia before the African Commission on Human and Peoples’ Rights has been accepted and is being heard (although Zambia refuses to participate), and it is considering a large investment arbitration against Zambia for the expropriation of the Barotseland native treasury, which would be valued at approximately USD 1 billion since the date of expropriation, with interest continuing to accrue.

– William Kirtley